The dollar dipped and the euro firmed on Friday as the market looked past what was likely to be a French rejection of the EU constitution in this weekend's referendum.
The single European currency edged up to US$1.2580 at 9pm GMT from US$1.2506 late on Thursday in New York.
The dollar stood at ¥107.88, from ¥107.93 on Thursday.
The euro had fallen to US$1.2492 overnight, the lowest level since Oct. 19, on increasing expectations that France would vote against the EU constitution today despite a last-ditch bid by President Jacques Chirac to rally support. Most analysts think the impact of a French no vote has been largely priced in, making players reluctant to stick their necks out any further, especially ahead of the three-day weekend in the UK and US.
Greg Anderson, currency analyst at ABN-Amro, said traders had been selling euros for most of the past seven weeks in anticipation of a rejection by the French vote and that "today they're taking profits."
He said investors were squaring positions ahead of the holiday weekend in London and New York.
"If there's a `no' vote, the euro dollar will stay between US$1.25 and US$1.26," he said. "If it's a `yes,' the euro could bounce back to US$1.27."
He added that he expected any moves to be limited because "it's still the same economy."
Opinion polls continue to suggest that around 54 percent of the French plan to vote no despite Thursday's television plea by Chirac.
Michael Woolfolk at the Bank of New York warned that the euro could well see a bounce back when the dust settles on the French vote, citing the dollar's inability to keep rising despite strong US data.
"The failure of a strong durable goods, GDP and personal income and spending reports to prompt any convincing break of US$1.2500, let alone the strong technical support level at US$1.2460, suggests that the euro may be positioned for a sharp consolidation higher following the French referendum vote this weekend," he said.
David Watt, senior economist at BMO Nesbitt Burns, said he sees more trouble ahead for the greenback as the rally runs out of steam.
"US investors are developing an appetite for overseas investing, suggesting that portfolio flows will prove a challenge to a sustained dollar rally," he said.
US data on Friday failed to inspire markets.
Personal incomes in the US rose 0.7 in April, in line with market expectations, while personal spending rose 0.6 percent, slightly below predictions.
"This report indicates that the US consumer continues to spend money at a brisk pace, supporting above-trend economic growth amidst rising income and employment," Woolfolk said.
In late New York trade, the US dollar stood at 1.2303 Swiss francs from SF1.2355 Thursday.
The pound was being traded at US$1.8235 after US$1.8200 late on Thursday.
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